Tuesday, April 20, 2010

IEIF France and European Property Prices

As I have noted before, one of the most interesting and damming bits of evidence that tipped many off to the existence of a significant real estate bubble during the early 2000s was the fact that dramatically increasing property prices were occurring in most industrialized nations.

The U.S., U.K., France, Ireland, most of continental Europe, Canada, Australia and elsewhere were all simultaneously experiencing significant property booms thereby thwarting, more or less, many of the “limited supply” and “Superstar Cities” arguments that sought to justify individual regions explosive appreciation.

Today we know that this massive boom in real estate was more a function of financialization and credit availability rather than fundamentals.

One of the better outcomes of this period is that there is now much more attention being directed to property markets demanding better analysis and sponsoring a host of new and novel data for tracking individual property markets.

As you can see from the chart, the early 2000s was an exception period of property price appreciation culminating in a “blow-off” peak in early 2007 as the leading edge of the sub-prime crisis ripped through the credit markets.

Similarly with the U.S. and U.K. markets, the France and Europe indices indicate that the initial vicious price slide hit a low in early 2009 and since have trended up.

It will be interesting to see how each region now trends as the U.S. has clearly started to weaken in recent months and the U.K. appears to be following suit.